Use credit wisely
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USE CREDIT WISELY. Consumer Action created this project in partnership with. Advantages of Credit. What can credit do for you? Help you through a financial emergency Enable you to pay for a purchase over time Provide a short, interest-free loan Enable you to rent a car, hotel room, etc.

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USE CREDIT WISELY

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Use credit wisely

USE CREDIT WISELY

Consumer Action created this project in partnership with


Advantages of credit

Advantages of Credit

  • What can credit do for you?

  • Help you through a financial emergency

  • Enable you to pay for a purchase over time

  • Provide a short, interest-free loan

  • Enable you to rent a car, hotel room, etc.

  • Offer convenience, security when shopping

  • Rebates or rewards

  • Allow you to avoid carrying cash

  • Allow you establish credit/build good credit


Types of credit

Types of Credit

Installment Credit

  • Fixed number of monthly payments

  • Car loans, mortgages

Revolving Credit

  • Short-term, open-ended

  • Assigned credit limit

  • Available credit fluctuates as you make purchases & payments

  • Option to make full or partial payment

  • HELOCs, credit cards


Card types

Card Types

Credit, charge & debit cards

  • Visa, MasterCard, Discover

    • Affinity cards

    • Rewards cards

    • Secured cards

  • Retail and gas cards

  • Stored value (prepaid) cards

  • Charge cards

  • Debit cards


Credit card terms

Credit Card Terms

  • Credit limit

  • Method of computing the balance

  • Minimum payment

  • Payment due date

  • Grace period

  • Interest rate

  • Fees


Credit card terms interest

Credit Card Terms: Interest

  • The lender’s fee for allowing you to use its money

  • Expressed as a percentage of the credit

  • Fixed vs variable interest rate

  • Annual percentage rate (APR)

  • Periodic interest rate

  • Different rates for a single card:

    • Teaser

    • Cash advance

    • Purchase

    • Penalty/Default

    • Balance transfer

    • Effective interest


Credit card fees

Credit Card Fees

  • Application fee

  • Annual fee

  • Balance transfer fee

  • Cash advance fee

  • Currency conversion fee

  • Late fee

  • Overlimit fee

  • Bounced check/returned item fee

  • Miscellaneous fees


Activity credit card jeopardy

Activity: Credit Card Jeopardy

  • Break into three groups

  • Choose one person on your team to “buzz” in when you think you have the correct “question” to the answer

  • A correct answer earns the point. An incorrect answer loses a point and allows another team to “steal” the point.

  • Remember to phrase your answer in the form of a question.


Credit card billing statements

Credit Card Billing Statements

  • Opening/closing date

  • Past due amount

  • New balance

  • Minimum payment due

  • Due date

  • Account summary

  • Transactions

  • Rewards information

  • Explanation of finance charges

  • Effective APR


Food for thought

Food for Thought

  • In 2007, credit card customers who revolved their debt (didn’t pay the balance in full each month) paid $18.1 billion in penalty fees to credit card companies.

    Source: “Don’t Get Clobbered By Credit Cards,” by Gary Weiss


Comparing credit cards

Comparing Credit Cards

  • Credit limit

  • Purchase APR

  • Balance transfer APR

  • Cash advance APR

  • Promotional APRs

  • Penalty APR

  • Variable-rate info

  • Grace period

  • Annual fee

  • Transaction fees

  • Penalty fees

  • Balance computation method

  • Minimum finance charge

  • Rewards


Obtaining credit

Obtaining Credit

  • Pre-approved offers

  • Invitations to apply

  • Instant credit

  • Consumer-initiated application

    • Banks, credit unions, retailers, card companies, and other institutions

  • Compare offerings, terms

    • www.consumer-action.org

    • www.bankrate.com

    • www.cardtrak.com

    • www.cardratings.com


Using credit wisely

Using Credit Wisely

  • Know your credit limit and don’t exceed it

  • Charge only as much as you can repay

  • Pay more than the minimum, if possible

  • Pay by your due date (and time!)

  • Use a debit card, not a credit card, to get cash

  • Don’t accumulate too much debt

  • Avoid penalty fees and rates

  • Consider optional fee-based services carefully

  • Contact a credit counselor (www.nfcc.org or www.aiccca.org)


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